Universal Challenge – making a success of Universal Credit

Published on Tax and Welfare

This report sets out a three point plan for the new Secretary of State, designed to both ensure that UC will provide the support needed for families moving into and progressing in work in the future and to make implementation as simple as possible. We argue that Stephen Crabb should restate and reclaim the role of UC in supporting more people into work and then boosting earnings, rather than being a source of savings for the Treasury to meet fiscal targets.

Even when considered alongside policies designed to boost incomes, including the introduction of the National Living Wage and income tax cuts, relative to the current system without those measures in place, the latest version of UC implies:

  • 1.3 million working families entitled to support in the tax credit system will no longer be entitled to any in-work support, leaving them £42 a week worse off on average;
  • A further 1.2 million are set to receive UC, but be an average of £41 a week worse off;
  • 1.7 million still in receipt of UC will be better off by an average of £38 a week, in part due to the more generous treatment of housing costs; and
  • Only around 200,000 families – a mix of those without children and couple parents – who are no are longer entitled to UC at all will be overall better off following cuts to in-work support and boosts to income from the National Living Wage and income tax cuts.
  • Ensure that the incentives UC creates are focused on those most likely to respond and in most need of support. With the employment picture vastly improved over recent years and levels of worklessness in households dropping dramatically, UC must be refocused to meet the living standards challenge of the future rather than the past.
  • Embrace the challenge of tackling low pay and progression. Despite the welcome stride taken forward with the implementation of the National Living Wage, in-work poverty and low pay look set to remain key challenges in the coming years – UC must be ready to meet them.
  • Take the chance to reassess the way in which the UC system itself functions and the processes people must go through when making their claim. As currently designed, UC piles extra burdens on recipients, these could be eased. Making people’s lives more difficult may make them resistant to the change UC brings. Requiring recipients to provide complex information so the system can calculate entitlements risks creating errors and mistakes that could cause implementation to stumble.